September 16, 2014

An innovative new policy will require fossil-fuel power plant developers to also invest in renewables.

India plans to ask power generators to invest in clean-energy projects as Prime Minister Narendra Modi seeks to accelerate the nation’s shift away from the troubled coal industry.

The government is preparing a rule that would mandate companies building fossil fuel based plants to also set up renewable capacity, Power Minister Piyush Goyal said yesterday. Coal generates 60 percent of the nation’s electricity even as supply bottlenecks contribute to chronic blackouts.

“A generator will have an obligation to bundle his supplies with a certain share of renewable energy,” Goyal said at a conference in New Delhi. He’s asked the nation’s biggest generator NTPC Ltd., as well as state-run miner Coal India Ltd., to make investments to promote clean energy.

Modi’s administration has pledged to quicken clean-energy deployment in India. The country’s 20 gigawatts of wind and solar capacity is one-fifth of China’s installations. India expects to receive more than $100 billion of investment in the next four years as it targets raising renewables’ share of the electricity mix to 12 percent, according to Goyal.

The new rule seeks to shift the onus of driving renewable investment away from India’s cash-strapped state power distributors.

India requires distributors to source as much as 10 percent of their power from renewables. It set up a renewable energy credit (REC) market three years ago allowing distributors to meet targets by buying certificates from clean utilities representing 1 megawatt-hour of electricity fed into the grid.

That market has failed to fund investment in wind and solar farms. Credits have languished at their floor price for two years as debt-burdened state utilities ignore the rule amid a lack of enforcement.

The new target for generators could be set at about 5 percent so that a developer building a 4,000-megawatt coal plant would have to also invest in about 200 megawatts of wind, solar, hydropower or biomass energy, Power Secretary Pradeep Kumar Sinha told a meeting of solar executives last month.

“I think this is the fastest and best way of taking renewable capacity forward,” Sinha said.